Report: Flutter may join Boyd in bid for Penn Interactive assets, including ESPN Bet

As activist investors are pushing Penn Entertainment to divest its digital gaming arm, The Deal is reporting Flutter and Boyd Gaming may partner on a deal. Boyd has a 5% ownership stake in Flutter, and partners with Flutter’s FanDuel in the US for retail and digital sports betting.

Penn stock was up 4.22% midday Friday on the news, while Flutter stock was essentially flat after a morning uptick. Boyd Gaming stock was also relatively flat after an early rise reacting to the news.

“Adding Flutter into the equation with Boyd of a potential Penn acquisition makes it more than interesting,” gaming consultant Brendan Bussmann told iGB. “It’s a back door into the ESPN brand for online, but would also give a brick-and-mortar presence to Flutter.”

Seeking Alpha Friday (5 July) wrote “Flutter (FLUT) may want to partner with Boyd Gaming (BYD) as the owner of FanDuel is interested in Penn’s interactive assets, according to a report from TheDeal.com on Friday, which cited unidentified sources.”

A Flutter representative had no comment on the report. Penn did not immediately reply to inquires Friday.

Penn Interactive launched its ESPN Bet waging platform last 14 November after breaking ties with original wagering partner Barstool Sports. ESPN Bet initially launched in 17 states, and added North Carolina when that market opened in March.

The goal with the rebranded platform and partnership with ESPN is to gain significant market share in digital sports betting. DraftKings and FanDuel account for about 80% of online wagering market share across the US.

So far, ESPN Bet has about 6% market share across America. It has not yet launched in New York, where it was able to get a license after WynnBet exited the state. Penn has plans to launch ESPN Bet in the biggest competitive market in the US later this year.

Acquisition rumours began swirling in late May when the Donerail Group wrote a letter to the Penn board. In the letter, the activist investor pointed to an 80% slide in Penn stock over the last three years.

“The growing pattern of guidance misses, alongside a demonstrated unyielding appetite to continue to invest in the company’s fledgling interactive projects, irrespective of past results and without a clear return framework, has significantly damaged the credibility of this management team and board of directors,” reads the letter.

Boyd made a bid in June

A month later, Truist Securities wrote that Penn stock is undervalued and set its target share price at $23-$25. Penn’s share price was last in that range in February. At about the same time, Reuters reported that Boyd Gaming offered Penn a takeover bid valued at more than $9bn. Several investment banks wrote that Penn likely would not be interested. They pointed to significant hurdles with a deal.

“The discussion provides several challenges, especially in several states that are currently dominated by Boyd and Penn properties,” said Bussmann, principal at Las Vegas-based BGlobal. “These include Louisiana, Indiana, and Missouri, among others. It’s a little bit of a jigsaw puzzle to see what you want, what you may need to shed, and find a potential suitor.”

Boyd Gaming is set to release second quarter earnings 25 July, followed by Penn 8 August, and Flutter 13 August. The earnings reports could provide some insight into a deal. The Penn call will also reveal where ESPN Bet in its quest to gain more digital gaming market share.